Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent-magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part inventories. Activity cost information and other data needed for supplier costing are as follows: I. Activity Costs Caused by Suppliers (testing failures and reordering as a result) Activity Costs Testing parts $4,500,000 Reordering parts 1,125,000 II. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part #827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56,250 56,250 Failed tests 4,500 2,925 39 36 Number of reorders 225 150 0 0 Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places. Otavalo Manufacturing Piura Company Part #625 $ $ Part #827 $ $
Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent-magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part inventories. Activity cost information and other data needed for supplier costing are as follows: I. Activity Costs Caused by Suppliers (testing failures and reordering as a result) Activity Costs Testing parts $4,500,000 Reordering parts 1,125,000 II. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part #827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56,250 56,250 Failed tests 4,500 2,925 39 36 Number of reorders 225 150 0 0 Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places. Otavalo Manufacturing Piura Company Part #625 $ $ Part #827 $ $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent-magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part inventories. Activity cost information and other data needed for supplier costing are as follows:
I. Activity Costs Caused by Suppliers (testing failures and reordering as a result)
| Activity | Costs |
| Testing parts | $4,500,000 |
| Reordering parts | 1,125,000 |
II. Supplier Data
| Otavalo Manufacturing | Piura Company | ||||||||||||
| Part #625 | Part #827 | Part #625 | Part #827 | ||||||||||
| Unit purchase price | $30 | $78 | $36 | $84 | |||||||||
| Units purchased | 450,000 | 225,000 | 56,250 | 56,250 | |||||||||
| Failed tests | 4,500 | 2,925 | 39 | 36 | |||||||||
| Number of reorders | 225 | 150 | 0 | 0 | |||||||||
Required:
Determine the cost of each supplier by using ABC. Round unit costs to two decimal places.
| Otavalo Manufacturing | Piura Company | |
| Part #625 | $ | $ |
| Part #827 | $ | $ |
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